03 Oct 25 top tips for getting your invoices paid quicker
You’re an ambitious business with a great product and a strong order book. Growth is on the horizon and the future looks bright. But there’s a problem….
While generating leads and landing sales is all going to plan, getting hold of the money owed is causing some headaches. So, what can you do about it?
There are many reasons why an invoice may not be paid on time, but any delay in receiving funds can be bad news for businesses – especially when there are overheads and wages to pay. In the case of small businesses and start-ups, who will often have very limited time and resources, a long delay could easily tip the balance and even prove fatal.
Did you know – it’s estimated that UK small business owners spend 10 per cent of their working day chasing payments, with an average wait of 14 extra days before invoices are settled and some delays running much longer.
Whatever size your business may be, chasing for payment of invoices is something you could do without. It’s a huge waste of time that could be better spent working on the business and engaging in other revenue generating activities. Especially when the reason for the delay may simply be a technicality or processing issue that is easily avoided.
Indeed, in the 17+ years the ASfB team has been supporting businesses with invoicing and outsourced accountancy, we’ve seen this issue occurring countless times and for a diverse range of reasons. There are however some common traps that can trip businesses up time and time again. Here are our top tips for avoiding them.
Avoiding the common traps to get paid quicker
1. Check your business details are correct
Ensure that your business details are up to date and shown clearly on your invoices, including contact information ready for any potential queries (both telephone and email). If you are a limited company, you must ensure you include your company registration number. If you’re VAT registered, your VAT number needs to be on there too.
2. Give each invoice a unique invoice number
It may sound a simple thing, but you’d be amazed how many people don’t do this and end up in a mess. By giving each individual invoice a unique number, you will make it far easier for you and your customers to track and discuss invoices, especially when there is a query.
3. Make sure the correct date is shown
Make it clear when your invoice was issued and when payment will be due. Usually, this will be the date the goods or services were supplied, or the date for a stage payment. If you are VAT registered the date should be the correct Tax Date.
4. Check if you need a purchase order number
If it’s your first time invoicing a new company, then always check whether you need a purchase order before you begin work. If you have been given a Purchase Order Number then include it on the invoice, along with the department contact name, delivery/shipping/consignment information, reference to approvals or certification – whatever information your customer has specified as needing to be included.
5. Check you understand the purchase and invoice approval processes
If you are dealing with larger businesses, particularly blue-chip corporates, it’s essential that you understand their purchase and invoice approval processes, when you first accept the order. Some common reasons for payment delays include:
- The person placing the order wasn’t authorised
- An Approved Supplier application needs to be completed
- The invoice needs to be structured in a pre-defined way so that it can be read by AI software
- The invoice must be submitted through a gateway or portal, to which you will need authorised access
- Payment terms differ from yours and may depend on specific milestones
- A settlement discount must be applied
- For overseas trade, check the accepted currency that must be used (Euro and US$ are often mandatory)
6. Send your invoices to the right email address
This might seem straightforward if you are dealing with smaller businesses, but for any client you always need to check where your invoices should be sent. For example, there may be a dedicated ‘accounts’ email address and you may need to use a specific subject line. If your invoice is to be paid on time, it needs to get in front of the right person!
7. Check your bank details are up to date
Make it easy for customers to pay you, by including your bank details clearly on any invoices. If you deal with overseas businesses, then make sure your full international bank details are shown (BIC, IBAN, SWIFT)
Bonus tip – Try and avoid accepting payment by cheque. Online or BACS payments cost less to process for both you and your customer and you won’t run the risk of having payments bounce, causing further delays.
8. Accept credit / debit card payments
Depending on the type of business you and your customers are in, it may be an advantage to accept payment by debit or credit card. There are a wide variety of services that can help in this space and which have the potential to integrate with cloud accounting software. For example, check out Stripe.
9. Move to online payment methods
If you use cloud accounting software such as Xero, you can provide a link on your invoices that directs your customers to pay online, making the whole process far quicker and easier.
10. Accept payment by Direct Debit
Being paid by direct debit is also one of the simplest ways to collect regular or occasional payments from customers. It can save you time, reduces the costs of collections and puts cleared funds directly into your bank account. So, if you haven’t already considered it, then now is the time. With a service such as GoCardless, you can collect variable amounts each time you invoice, or you can set up a regular payment plan.
If you use cloud accounting software, the Direct Debit payments will automatically be set up when you send the invoice and the payment will be reconciled in your bank account when it’s been received.
11. Invoice for the amount agreed
Make sure that you invoice the amount you have agreed with your client and present the information clearly and accurately. If you use a manual system, check that the quantities and amounts are all correct. Nobody likes surprises when it comes to finance, so always avoid including any unexpected charges, as that’s one of the surest ways to get your invoice rejected.
12. Ensure you have calculated VAT correctly
Show clearly if some items are standard rated, and some are zero rated, exempt, or subject to lower rate VAT. If your sale is to a VAT registered business you must show your VAT number on the invoice too.
13. Avoid snail mail
Most businesses nowadays will expect invoices to be sent across by email. This is a far less time consuming and more eco-friendly method than printing something off and putting it in the post. Plus, you’ll save on the postage costs.
14. Send the invoice as a pdf or protected document
Send the invoice as a pdf or protected document that cannot be edited by the customer. You may find some customers, particularly large businesses, will insist on this but it’s also good practice.
15. Don’t amend and resend invoices
Changing an invoice and keeping the same invoice number can lead to confusion, both for your customer and your accounts. And that can mean delays. If anything needs changing, it’s always best to issue a credit note with a clear explanation and to send a fresh invoice.
16. Make sure your payment terms are clear and agreed
Ensure your payment terms are included on your invoice and very clear. For example, it’s better to say, ‘payment due in 30 days’ than to say, ‘net 30’. Also include the date that payment should be made by to make it super clear. When onboarding a new customer, it can be helpful to discuss and agree your payment terms with them in writing. Especially if you plan to other any incentives for early payment, or charges for late payments. However, if you are dealing with larger customers, you may find you have little choice but to adhere to their terms. Always bear this in mind for your financial forecasting.
17. Invoice on the day you supplied
Raise your invoice and send it on the day you have made your supply (the Tax Date). Don’t leave invoicing to the end of the week, or worse still, the end of the month. Do it while it’s fresh in everyone’s mind, so that the invoice is accurate, queries can be dealt with swiftly and the countdown to payment is started.
18. Check if your customer is credit worthy
Will they pay or are they at risk of going out of business? It’s the reason you should never skimp on a credit check. This is important for any size of customer, as big businesses can hit problems and call in the administrators just like anyone else. If you are accepting a significant order, check the news as well as credit sources. Request credit references from other suppliers and possibly their bank. You never want to be left out of pocket by someone taking your goods and not then paying you.
19. Provide statements of account
Provide your customers with a clear statement of account each month, which shows all the invoices that are due, including those that are overdue. If several invoices are outstanding, consider putting a freeze on any further work until they are paid.
20. Send reminders and track credit control
It’s good practice to send a polite reminder by email a few days before a payment is due. And as soon as invoices are overdue, to send another polite reminder, or speak with your customer directly. Have a clear tracking system to record each action and phone call you make – and promises that are made to make payment.
If you’re using cloud software such as Xero it can automate some of the process for you, by sending out email reminders, which can be tailored as you wish. For example, you may choose to set up a sequence as follows:
- This invoice will be due for payment in three days’ time
- This invoice is due for payment today
- This invoice is now overdue
- Thank you for your payment
21. Make sure you have a happy customer
Customers who value your service or product and are fully satisfied with what they’ve been supplied, will usually have no problem paying you. Make sure that you have a happy customer. If they haven’t paid up, there may be an issue you need to know about.
22. Ask for a deposit or staggered payment
Rather than invoice for the whole amount at the end of a transaction, consider limiting your risk by asking for a deposit in advance, or agreeing payment at various stages while the work is in process. This can be particularly useful when a project is long and the total cost substantial.
23. Get paid in advance
For some types of businesses, pre-payment is the norm. For example, professional services firms such as solicitors. Check if this is normal practice for your kind of business. And even if it isn’t, if you want to introduce it you may be surprised how many customers are open to the idea.
24. Avoid cash payment disputes
If you accept cash (particularly as part payment) count it in front of your customer and issue a receipt with the amount stated in words and the date it was received. Keep a copy signed by your customer so there’s never any room for doubt. This will prevent any potential misunderstandings, where a client may claim that a part payment was made for an amount greater than you received.
Also be aware of Money laundering Regulations that apply if you make or accept cash payments of 10,000 Euro or more (roughly £8,800). Push for online payment wherever you can, so the money is safe in your bank account. That will always be the best option.
25. Check that payment has cleared before delivery
Finally, if you’ve not offered credit to your customer, then make sure that funds are in place before making a delivery or releasing your goods and services – especially to a new customer! Check with your bank that payment has been received and fully cleared. And just be mindful of the risk of fraud associated with electronic payments made through Western Union, PayPal and even bank drafts.
Having trouble with invoices and late payment?
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Let’s talk – give us a call on 01202 755600 or drop us an email to firstname.lastname@example.org and we can arrange a good time to chat.